nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2023‒12‒18
eleven papers chosen by

  1. Comparing green productivity under convex and nonconvex technologies: Which is a robust approach consistent with energy structure? By Haiyan Deng; Ge Bai; Kristiaan Kerstens; Zhiyang Shen
  2. Statistical Inference for Hicks–Moorsteen Productivity Indices By Léopold Simar; Valentin Zelenyuk; Shirong Zhao
  3. An environmental Luenberger–Hicks–Moorsteen total factor productivity indicator: empirical analysis considering undesirable outputs either as inputs or outputs, and attention for infeasibilities By Zhiyang Shen; Kristiaan Kerstens; Tomas Baležentis
  4. Let's Switch to the Cloud: Cloud Adoption and its Effect on IT Investment and Productivity By Schiersch, Alexander; Duso, Tomaso
  5. Foreign Direct Investment, Information Technology and Total Factor Productivity Dynamics in Sub-Saharan Africa By Asongu, Simplice; Odhiambo, Nicholas
  6. Plant capacity notions: review, new definitions, and existence results at firm and industry levels By Kristiaan Kerstens; Jafar Sadeghi
  7. Demography, Growth, and Robots in Advanced and Emerging Economies By Gravina, Antonio Francesco; Lanzafame, Matteo
  8. Have productivity and pay decoupled in the UK? By Andreas Teichgraeber; John Van Reenen
  9. Optimal resource allocation: Convex quantile regression approach By Sheng Dai; Natalia Kuosmanen; Timo Kuosmanen; Juuso Liesi\"o
  10. Modeling economies of scope in joint production: Convex regression of input distance function By Timo Kuosmanen; Sheng Dai
  11. Evaluating different groups of mutual funds using a metafrontier approach: Ethical vs. non-ethical funds By Qianying Jin; Antonella Basso; Stefania Funari; Kristiaan Kerstens; Ignace van de Woestyne

  1. By: Haiyan Deng; Ge Bai; Kristiaan Kerstens (LEM - Lille économie management - UMR 9221 - UA - Université d'Artois - UCL - Université catholique de Lille - Université de Lille - CNRS - Centre National de la Recherche Scientifique); Zhiyang Shen (LEM - Lille économie management - UMR 9221 - UA - Université d'Artois - UCL - Université catholique de Lille - Université de Lille - CNRS - Centre National de la Recherche Scientifique)
    Abstract: Total factor productivity is used to explore the input–output efficiency of the economy and the driving factors behind economic growth. Although scholars have researched the total factor productivity approach, comparisons among different models in empirical research are rare and few scholars have focused on worldwide total factor productivity gains. Using convex and nonconvex technologies, this contribution investigates green productivity gains of 129 worldwide countries during 2000–2019 based on three popular productivity measures, namely, Luenberger–Hicks–Moorsteen indicator, Luenberger productivity indicator, and Malmquist–Luenberger index, respectively. Inspired by a metafrontier approach, we compare their productivity evolutions with the energy structure among 121 economies. A negative relationship is expected between the change in the proportion of fossil fuel energy consumption and green productivity. Our results show that the Luenberger–Hicks–Moorsteen productivity indicator under nonconvex technologies is a more convincing productivity measure when considering undesirable outputs in production technology.
    Date: 2023–12
  2. By: Léopold Simar (Institut de Statistique, Biostatistique et Sciences Actuarielles, Université Catholique de Louvain, Voie du Roman Pays 20, B1348 Louvain-la-Neuve, Belgium); Valentin Zelenyuk (School of Economics and Centre for Efficiency and Productivity Analysis (CEPA) at The University of Queensland, Australia); Shirong Zhao (School of Finance, Dongbei University of Finance and Economics, Dalian, Liaoning 116025)
    Abstract: The statistical framework for the Malmquist productivity index (MPI) is now welldeveloped and emphasizes the importance of developing such a framework for its alternatives. We try to fill this gap in the literature for another popular measure, known as Hicks–Moorsteen Productivity Index (HMPI). Unlike MPI, the HMPI has a total factor productivity interpretation in the sense of measuring productivity as the ratio of aggregated outputs to aggregated inputs and has other useful advantages over MPI. In this work, we develop a novel framework for statistical inference for HMPI in various contexts: when its components are known or when they are replaced with nonparametric envelopment estimators. This will be done for a particular firm’s HMPI as well as for the simple mean (unweighted) HMPI and the aggregate (weighted) HMPI.Our results further enrich the recent theoretical developments of nonparametric envelopment estimators for the various efficiency and productivity measures. We examine the performance of these theoretical results for the unweighted and weighted mean of HMPI using Monte-Carlo simulations and also provide an empirical illustration.
    Keywords: Hicks–Moorsteen Productivity Index, Data Envelopment Analysis, Aggregate, Central Limit Theoremney
    JEL: C12 C14 C43 C67
    Date: 2023–10
  3. By: Zhiyang Shen (LEM - Lille économie management - UMR 9221 - UA - Université d'Artois - UCL - Université catholique de Lille - Université de Lille - CNRS - Centre National de la Recherche Scientifique); Kristiaan Kerstens (LEM - Lille économie management - UMR 9221 - UA - Université d'Artois - UCL - Université catholique de Lille - Université de Lille - CNRS - Centre National de la Recherche Scientifique); Tomas Baležentis (Vilnius University [Vilnius])
    Abstract: The measurement of economic growth is important for identifying the development patterns followed by different economies. In the light of sustainable development goals, one needs to be able to track the green growth, i.e., they must the adjusted in regard to generation of undesirable outputs that are usually non-marketed. This contribution puts forward an empirical case of the economically developed countries grouped in OECD and measures their total factor productivity (TFP) growth. This is done by exploiting a novel formulation of the Luenberger–Hicks–Moorsteen (LHM) TFP indicator based on the Kuosmanen (Am J Agric Econ 87(4):1077–1082, 2005) proposal. We argue that undesirable outputs must be regarded as special outputs but not inputs in both the production technology and TFP measure. We compare two models: one that considers undesirable outputs as special outputs in the directional distance functions of TFP indicator following Kuosmanen (Am J Agric Econ 87(4):1077–1082, 2005), and another that considers undesirable outputs as inputs following Abad (J Environ Manage 161:325–334, 2015). This proposed approach assumes that input- and output-orientations are taken, with the latter handling both desirable and undesirable outputs simultaneously. Still, we compare our results with those based on the other more conventional frameworks. The empirical case deals with OECD country-level data for 1991–2019. The results suggest that there exist substantial differences in the resulting measures of the TFP growth depending on the distance functions used in the calculation of the LHM indicator.
    Date: 2023–07–07
  4. By: Schiersch, Alexander; Duso, Tomaso
    JEL: D24 D25 L60 L80 O14 O33
    Date: 2023
  5. By: Asongu, Simplice; Odhiambo, Nicholas
    Abstract: Compared to other regions of the world, the potential for information technology penetration in sub-Saharan Africa (SSA) is very high. Unfortunately, productivity levels in the region are also very low. This study investigates the importance of information technology in influencing the effect of foreign direct investment (FDI) on total factor productivity (TFP) dynamics. The focus is on 25 countries in SSA. Information technology is measured with mobile phone penetration and internet penetration, while the engaged TFP productivity dynamics are TFP, real TFP, welfare TFP, and real welfare TFP. The empirical evidence is based on the Generalised Method of Moments. The findings show that, with the exception of regressions pertaining to real TFP growth for which the estimations do not pass post-estimation diagnostic tests, it is apparent that information technology (i.e. mobile phone penetration and internet penetration) modulate FDI to positively influence TFP dynamics (i.e. TFP, welfare TFP, and welfare real TFP). Policy and theoretical implications are discussed.
    Keywords: Productivity; Foreign Investment; Information Technology; Sub-Saharan Africa
    JEL: E23 F21 F30 L96 O55
    Date: 2022–01
  6. By: Kristiaan Kerstens (LEM - Lille économie management - UMR 9221 - UA - Université d'Artois - UCL - Université catholique de Lille - Université de Lille - CNRS - Centre National de la Recherche Scientifique); Jafar Sadeghi (Ivey Business School)
    Abstract: This study investigates the existence of solutions for the key plant capacity utilisation (PCU) concepts using general nonparametric technologies. This is done via a theoretical review of existing and some new PCU concepts. Focusing on short-run and long-run output-oriented, attainable output-oriented, and input-oriented PCU notions, we first investigate the existence of solutions at the firm level. Under mild axioms, this question regarding the existence of solutions for these PCU concepts at the firm level is affirmatively answered under variable and constant returns to scale as well as under convex and nonconvex assumptions. However, short-run and long-run output-oriented and attainable output-oriented PCU concepts may not be implementable depending on certain conditions. There are no such reservations for the input-oriented PCU. Then, for this same range of PCU concepts, we explore the more difficult question as to the existence of solutions at the industry level. The output-oriented and attainable output-oriented PCU exist at the industry level under strict conditions: existence and attainability are interwoven at this level. The industry input-oriented PCU is always feasible at the industry model. This theoretical review is supplemented by a semi-systematic empirical review, and an empirical application. We conclude that input-oriented PCU is clearly the best concept.
    Keywords: data envelopment analysis, nonparametric technology, capacity utilisation
    Date: 2023
  7. By: Gravina, Antonio Francesco (University of Palermo); Lanzafame, Matteo (Asian Development Bank)
    Abstract: This paper provides estimates of the impact of demographic change on labor productivity growth, relying on annual data over 1961-2018 for a panel of 90 advanced and emerging economies. We find that increases in both the young and old population shares have significant negative effects on labor productivity growth, working via various channels—including physical and human capital accumulation. Splitting the analysis for advanced and emerging economies shows that population aging has a greater effect on emerging economies than on advanced economies. Extending the benchmark model to include a proxy for the robotization of production, we find evidence indicating that automation reduces the negative effects of unfavorable demographic change—in particular, population aging—on labor productivity growth.
    Keywords: demographic change; labor productivity; robots
    JEL: C33 J11 O40
    Date: 2023–11–09
  8. By: Andreas Teichgraeber; John Van Reenen
    Abstract: In the long-run at the macro level, the real pay of workers tends to follow labour productivity. In recent years, however, there have been concerns that this relationship has broken down and that pay has become "decoupled" from productivity, growing much more slowly. If the mean hourly compensation of workers grows more slowly than GDP per hour, this means the labour share will fall and this has been a well-documented phenomenon in the US since the early 1980s. By contrast, we show that in the UK, employee mean hourly compensation has grown at the same rate as labour productivity between 1981 and 2019. Although there has been no "net decoupling" in this sense, there has been a large divergence between median employee hourly wage growth and productivity growth of about 25 percentage points. About three-fifths of this "total decoupling" is due to increasing inequality (mean wages growing faster than median wages) and one-third is due to the increased non-wage compensation costs, in particular employer pension contributions. However, this analysis relates to employee compensation. The average self-employed worker has seen their income grow by only 50%, compared to 80% for the average employee. Using micro-data, we show that this gap can essentially be all explained by (i) the growth in the numbers of "solo self-employed" (who have relatively low incomes), and (ii) a much greater fall in hours worked by the self-employed than for the employed. Finally, if we "correct" the labour share for self-employment and non-wage labour costs, the UK labour share has fallen by about 3.5 percentage points over the last four decades.
    Keywords: pay, productivity, decoupling, labour share, self-employed
    Date: 2021–11–01
  9. By: Sheng Dai; Natalia Kuosmanen; Timo Kuosmanen; Juuso Liesi\"o
    Abstract: Optimal allocation of resources across sub-units in the context of centralized decision-making systems such as bank branches or supermarket chains is a classical application of operations research and management science. In this paper, we develop quantile allocation models to examine how much the output and productivity could potentially increase if the resources were efficiently allocated between units. We increase robustness to random noise and heteroscedasticity by utilizing the local estimation of multiple production functions using convex quantile regression. The quantile allocation models then rely on the estimated shadow prices instead of detailed data of units and allow the entry and exit of units. Our empirical results on Finland's business sector reveal a large potential for productivity gains through better allocation, keeping the current technology and resources fixed.
    Date: 2023–11
  10. By: Timo Kuosmanen; Sheng Dai
    Abstract: Modeling of joint production has proved a vexing problem. This paper develops a radial convex nonparametric least squares (CNLS) approach to estimate the input distance function with multiple outputs. We document the correct input distance function transformation and prove that the necessary orthogonality conditions can be satisfied in radial CNLS. A Monte Carlo study is performed to compare the finite sample performance of radial CNLS and other deterministic and stochastic frontier approaches in terms of the input distance function estimation. We apply our novel approach to the Finnish electricity distribution network regulation and empirically confirm that the input isoquants become more curved. In addition, we introduce the weight restriction to radial CNLS to mitigate the potential overfitting and increase the out-of-sample performance in energy regulation.
    Date: 2023–11
  11. By: Qianying Jin (NJU - Nanjing University); Antonella Basso (University of Ca’ Foscari [Venice, Italy]); Stefania Funari (University of Ca’ Foscari [Venice, Italy]); Kristiaan Kerstens (LEM - Lille économie management - UMR 9221 - UA - Université d'Artois - UCL - Université catholique de Lille - Université de Lille - CNRS - Centre National de la Recherche Scientifique); Ignace van de Woestyne (KU Leuven - Catholic University of Leuven - Katholieke Universiteit Leuven)
    Abstract: Ethical mutual funds (MFs) have grown in popularity over the past few years. However, the investors generally have concerns about their profitability compared to the investment group of non-ethical MFs. Performance comparison could be a potential way to address this concern, but the differences in their essential investment objectives raise the issue of heterogeneity between the ethical and non-ethical investment groups. Motivated by addressing this heterogeneity, this article proposes a general nonconvex metafrontier framework for comparing different investment groups of MFs. Investment groups can exhibit heterogeneity from different perspectives, such as from regulations, resource constraints, to name a few. To provide a rather complete framework for estimating the frontiers, the diversified, convex and nonconvex evaluation approaches are adapted and presented in a multi-moment setting. The proposed metafrontier framework is then applied to an empirical example where the investment groups are heterogeneous from the ethical perspective. The empirical results suggest that the ethical constraint does not necessarily lead to a worse financial performance; quite the contrary, the results provide some evidence on the outperformance of ethical MFs over the non-ethical MFs.
    Date: 2024–02

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